Machine Learning Algorithms with Intermittent Demand Forecasting: An Application in Retail Apparel with Plenty of Predictors

Abstract

Demand forecasting is a key factor for apparel retail stores to sustain their business, especially where there are variety of products and intermittent demand. In this study, two of the most popular machine learning methods, random forest (RF) and k-nearest neighbour (KNN), have been used to forecast retail apparel’s intermittent demand. Numerous variables that may have an effect on the sales, have been taken into account one of which is defined as “special day” that might trigger intermittence in the demand. During the application of the forecast, four different datasets were used to provide reliability. 28 different variables were used to increase accuracy of the forecasting and experience of the behaviours of the algorithms. Root mean square error (RMSE) was used to evaluate performance of the methods and as a result of this study, RF showed better performance in all four datasets comparing to KNN.